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Report: Banco do Brasil CEO rebuffs immediate sale, IPO of fund manager BB DTVM

Banco do Brasil SA President and CEO Rubem Novaes said it is not yet time to consider a sale or an IPO of the state-owned bank's fund manager, BB Gestão de Recursos-Distribuidora de Títulos e Valores Mobiliários SA, Valor Econômico reported.

A private partnership to promote other businesses of BB DTVM, as the fund manager is known, or even a venture without a partner, would be the best way to proceed, Novaes told Brazil's Economic Minister Paulo Guedes in a meeting held in February, according to the publication, which did not cite a source.

Brazil's economy ministry reportedly has been pushing to list BB DTVM on the local stock exchange. Novaes, however, believes such a move would negatively impact the business.

The executive reportedly argued that a potential IPO would mean BB DTVM would have to get rid of its so-called extramarket funds, which manage large volumes of public cash. BB DTVM's Curto Prazo Supremo Setor Público, for example, is a fund created to manage public resources on the municipal and state levels, which generates 2.1 billion reais in management fee revenue per year.

BB DTVM is Brazil's largest fund manager, with 927.4 billion reais worth of assets under management and a market share of about 21% in 2018, according to a report by Anbima cited by Valor. Extramarket funds contributed up to 52.5 billion reais to BB DTVM, bringing the total volume of its managed third-party resources to 993.6 billion reais in 2018.

Novaes told special privatization secretary Salim Mattar that he prefers to sell other stakes of Banco do Brasil, including those it holds in insurance company IRB-Brasil Resseguros SA and Neoenergia SA, two sources told Valor. Banco do Brasil previously denied a media report that it is looking to sell its stake in IRB-Brasil.

Meanwhile, analysts from Itaú BBA affirmed that Banco do Brasil is looking for partners for its units — including its asset management, investment banking and debt collector operations — instead of publicly listing them, Reuters reported.

CFO Carlos Hamilton Vasconcelos Araújo said the partnerships would be akin to those entered into by the bank's unit, BB Seguridade Participações SA, the analysts said. BB Seguridade's partners, including Principal Financial Group, Mapfre, and Icatu Hartford, have stakes in the former's insurance companies.

"A similar structure can be applied to other segments, particularly the asset management and investment banking businesses," the analysts said.

An initial study suggested that Banco do Brasil's businesses could attract a higher value if the bank pursued partnerships with big financial institutions first, with the listing of the units to follow, an unnamed source told Reuters.

Novaes previously said he would look to sell off bank assets that do not have synergies with its core operations as part of Guedes' wider austerity plan. As for core assets, Novaes maintained that the bank would not sell them off and would instead consider selling shares in IPOs and look to partnerships involving those subsidiaries.

As of March 11, US$1 was equivalent to 3.84 Brazilian reais.